What is interestWhat is interest? In finance and trading, interest is a fe... More?
In finance and trading, interest is a fee paid by a borrower of assets (or ) to the owner (or ) as a form of compensation for the use of the assets. In economics, interest is considered the priceWhat are value stocks? A value company is a company that app... More of credit.
It is most commonly the priceWhat is price? The price is the measure of the value of good... More paid for the use of borrowed , or moneyMoney is a generally accepted medium of exchange to buy and... More earned by deposited funds.
When money is borrowed, interest is typically paid to the lender as a percentage of the amount owed to the lender. This percentage is called the .
Interest is compensation to the lender, for …
- … the risk of principal loss. This is called credit risk.
- … forgoing other that could have been made with the loaned asset or money. This is called opportunity cost.
The borrower enjoys the benefit of using the assets ahead of the effort required to pay for them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege.
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